Got this from Reuters this morning- "The Justice Department has warned Apple and five of the biggest U.S. publishers that it plans to sue them, accusing them of colluding to raise the prices of electronic books, the Wall Street Journal said, citing people familiar with the matter"

Got this from Reuters this morning- "The Justice Department has warned Apple and five of the biggest U.S. publishers that it plans to sue them, accusing them of colluding to raise the prices of electronic books, the Wall Street Journal said, citing people familiar with the matter"

Wall Street Journal first reported this today and here is part of their article:

Prior to agency pricing, Amazon often sold best-selling digital books for less than it paid for them, a marketing stance that some publishers worried would make the emerging digital-books marketplace less appealing for other potential retailers. The publishers' argument that agency pricing increased competition hasn't persuaded the Justice Department, a person familiar with the matter said. Government lawyers have questioned how competition could have increased when prices went up. Amazon declined to comment.

It isn't clear if the talks will lead to a settlement or how many of the parties would sign on. One publishing executive familiar with the situation said that the talks have been going on for some time and "negotiations have taken many turns."

A second publishing executive said that "a settlement is being considered for pragmatic reasons but by no means are we close." This person said that there are significant legal costs associated with the probe. "You have to consider a settlement, whether you think it's fair or not," the person said.

Contracts such as Apple's prevent publishers from selling books to other buyers at a cheaper rate. Such terms, known as "most favored nation" clauses, have drawn the scrutiny of the Justice Department in recent years in the health-care industry because they can sometimes be used to hamper competition.

One idea floated by publishers to settle the case is to preserve the agency model but allow some discounts by booksellers, according to the people familiar with the matter.

Among the issues that the Justice Department has examined is the effort by three publishers involved in the probe to "window" e-books in late 2009, according to people familiar with the matter. That December, Simon & Schuster, HarperCollins and Hachette said they would delay the electronic publication of a certain number of titles for a limited time after the publication of the hardcover edition.

At the time, the publishers expressed concern that $9.99 digital best sellers represented a long-term threat to the future of the publishing business. The windowing efforts, however, gradually faded away.

The European Union has said it is also investigating the allegations. Several class-action lawsuits have been filed and consolidated in a New York federal court. Apple moved to dismiss the case this month, arguing it didn't coordinate with any publishers. "Apple's entry created new competition in eBook distribution and a vastly larger pool of eBook consumers," it wrote in its motion.

For publishers, digital-book revenue is still the fastest-growing segment of the business at a time when the sale of physical books is in decline. E-book sales more than doubled to $970 million in 2011, according to a survey of 77 publishers conducted by the Association of American Publishers. As more consumers migrate to dedicated e-readers and tablet reading devices, the number of consumers reading digitally will likely increase.

At the same time, there are fewer bookstores in which to sell physical books, highlighted by the liquidation last year of Borders Group Inc., once the country's second-largest book chain. In addition, the nation's largest bookstore chain, Barnes & Noble, has increasingly dedicated more of its space to nonbook-related items such as its popular line of educational toys and games.

It isn't the first time the Justice Department has taken action against Apple for allegedly colluding with other companies. In 2010, several technology companies agreed to settle Justice Department allegations that they colluded to hold down wages by improperly agreeing not to poach each other's employees.

The evidence that surfaced in that case, as well as an ongoing private class-action lawsuit that followed, showed Mr. Jobs as a prime mover behind that antipoaching agreement. Apple didn't admit to any wrongdoing.